Mortgages · decision guide
80-10-10 Piggyback Loan vs. PMI
These get compared as if PMI is the “cost” and a piggyback loan is the “workaround.” That framing hides the actual comparison: PMI is an insurance premium on a shrinking balance that the law forces your servicer to cancel. A piggyback is a second mortgage that keeps charging interest for as long as you carry it, with no automatic end date at all.
At August 2026 rates, a small second lien held for only a few years usually beats PMI. A large second lien, or one you carry a long time, usually loses to PMI — because PMI has a legal expiration date and the second mortgage does not. There is no single right answer; there is a break-even that depends on how much you borrow on the second lien and how long you keep it.
What each one actually is
80-10-10 piggyback
Two loans: an 80% first mortgage and a 10% second mortgage — a home equity loan or HELOC — behind it, plus your own 10% cash down payment. Because the first mortgage sits at exactly 80% loan-to-value, the lender does not require PMI on it. You are not avoiding a cost — you are financing the same gap with a second loan instead.
PMI
A single loan above 80% LTV, with private mortgage insurance added as a monthly charge that protects the lender against default — it pays you nothing if you lose the home. It is priced as a percentage of your original loan amount and, by federal law, must be cancelled once your balance is scheduled to reach 78% of that original value.
How the second lien is actually structured
“The second mortgage” isn't one product — it's a choice, and the choice changes your risk, not just your rate:
Closed-end home equity loan
A fixed amount, disbursed once at closing, amortizing on a fixed rate and a fixed schedule — the most common structure for an 80-10-10, since it funds the down-payment gap in one lump sum and behaves like a normal installment loan. Your payment doesn't move.
HELOC
An open-end line you draw against, and per the CFPB it “usually” carries a variable rate, so your payment can rise with the index it's pegged to. A HELOC also runs a draw period (commonly around 10 years) where payments can be interest-only, followed by a repayment period where the payment steps up — often “significantly,” per the CFPB — as principal repayment kicks in.
A fixed-rate second lien is the more predictable half of the piggyback comparison above; a variable HELOC adds a second source of payment risk on top of the one this guide already walks through — the rate can move against you independent of whether you keep the loan past its break-even point.
Where the numbers sit in August 2026
The first mortgage on either path prices off the same baseline: Freddie Mac's 30-year survey average was 6.67% for the week of August 13, 2026. The second lien on a piggyback prices well above that — Bankrate's national average for a fixed-rate home equity loan was 8.10% APR (range 5.90%–10.25%) as of August 12, 2026, and its national average for a HELOC was 7.30% (range 3.99%–11.80%) the same date. PMI, per Bankrate, runs 0.46% to 1.5% of the loan amount per year, depending mainly on credit score.
The math, worked
A $400,000 home, 10% down ($40,000), $360,000 financed either way. Both first-mortgage legs are priced at the same 6.67% baseline for comparability — in practice a 90% LTV first mortgage can carry a small pricing adjustment that an 80% LTV first mortgage does not, which this simplification does not capture. The second lien uses Bankrate's 8.10% national average, which Bankrate's own survey methodology quotes for a 5-year fixed-rate home equity loan — we apply that rate to a longer, 20-year amortization below because a 5-year piggyback second is unusually short for this purpose; a lender quoting a 20-year term specifically could price above or below the 5-year survey average. A HELOC or a different lender's term would also change the numbers.
| 80-10-10 piggyback | 90% + PMI | |
|---|---|---|
| First mortgage | $320,000 @ 6.67% | $360,000 @ 6.67% |
| First mortgage P&I | $2,059 / mo | $2,316 / mo |
| Second lien | $40,000 @ 8.10%, 20-yr | — |
| Second lien payment | $337 / mo | — |
| PMI (0.46%–1.5% of $360,000) | — | $138–$450 / mo |
| Total monthly payment | $2,396 | $2,454–$2,766 |
First-mortgage P&I is standard 30-year amortization at 6.67%. Second-lien payment is standard 20-year amortization at 8.10% on $40,000. PMI range applies Bankrate's published 0.46%–1.5% premium band directly to the $360,000 loan amount, divided over 12 months.
On this example, the piggyback wins on monthly payment even against the low end of the PMI range — but only because the comparison stops at month one. PMI on the $360,000 loan is legally required to terminate once the balance is scheduled to hit 78% of the original value, which on this loan is month 111 — about 9.2 years in; from that point on, the 90%-plus-PMI path pays less than the piggyback's $2,396, which keeps its second-lien payment for the full 20-year term (or until refinanced or paid off early). A borrower who expects to own the home well past the PMI cancellation date, or who could qualify for PMI near the low end of the range, should run both scenarios past that date — not just at closing. The 80/10/10 piggyback calculator does that with your own numbers: it amortizes both structures out to whatever year you expect to sell or refinance and reports the break-even month at which the cheaper one changes — which is not the same month the monthly payments cross.
Sensitivity check
Because the 8.10% second-lien rate is a 5-year average applied to a 20-year term, it's worth checking whether the piggyback's edge survives at a worse rate. It does: even at the top of Bankrate's published range, 10.25%, the second-lien payment rises to $393/mo and the piggyback total to $2,451.19 — still below the low end of the PMI path, $2,453.84. The month-one conclusion holds across the entire published rate range, not just at the survey average.
Side by side
| 80-10-10 second mortgage | PMI | |
|---|---|---|
| What it is | A second mortgage — you owe the money and pay it back with interest | An insurance premium that protects the lender, not a loan |
| Who it protects | No one — it's simply borrowed money | The lender, in case you default; it does not protect you |
| Rate | Fixed or variable, priced above your first-mortgage rate | Not a rate — an annual percentage of the original loan amount |
| Duration | Runs its own term (commonly 10–20 years) until paid off or refinanced — no automatic end date | Must legally terminate automatically once the loan is scheduled to hit 78% of original value |
| Can you cancel it early? | Only by paying it off or refinancing — both cost money | Yes — request cancellation once you reach 80% of original value, no cost beyond the request |
| Closing costs | A second set of loan closing costs, on top of the first mortgage's | None — it's a cost embedded in your existing mortgage payment |
The single biggest asymmetry is duration: PMI is required by federal law to end. A second mortgage ends only when you pay it off, refinance it, or reach the end of its term — whichever comes first, and none of those happen automatically. Price your own numbers with the PMI calculator to see your exact monthly premium and cancellation date, and the closing costs calculator to account for the second loan's own closing costs, which the worked example above does not include.
Tax treatment: what actually deducts, and what doesn't
PMI premiums have no current federal deduction — the itemized deduction for mortgage insurance premiums has expired and doesn't apply to 2026 returns. The piggyback's second-lien interest is a different story: per IRS Publication 936, interest on a home equity loan or HELOC is deductible on the same terms as your first mortgage — but only if the loan is acquisition debt (used to buy, build, or substantially improve the home securing it), and only up to the combined $750,000 cap that applies to your first and second lien together, not $750,000 each. An 80-10-10's second lien, used to close the purchase, qualifies as acquisition debt. And in either case, the deduction only matters if you itemize — most filers now take the standard deduction instead, which makes this a smaller factor for most buyers than it once was.
The complication PMI doesn't have: refinancing with a second lien in place
PMI attaches to a single loan, so refinancing that loan is a normal, single-lien refinance. A piggyback leaves you with two liens on the property, and refinancing the first one doesn't automatically carry the second along. Under Fannie Mae's Selling Guide (B2-1.2-04), if you keep the second lien in place when you refinance the first, the new lender generally requires a resubordination agreement — a document from the second-lien holder confirming it will stay behind the new first mortgage rather than jumping ahead of it. Getting that agreement takes extra coordination and time, and a second-lien holder that is slow, uncooperative, or charges a fee to resubordinate can delay or derail an otherwise straightforward refinance. (Some states let the second lien keep its position automatically without a new agreement — check your own state's law before assuming you'll need one.) PMI carries none of this friction: refinance the loan it's attached to, and a new PMI policy — or none, if you've crossed 80% equity — is simply priced into the new loan.
Putting it together: when each genuinely wins
Line up the pieces from this guide and the decision stops being about which one is “cheaper” in month one and becomes about how long you'll hold the loan and how much structural risk you're willing to carry:
- A piggyback tends to win when the second lien is small, fixed-rate, and you expect to sell or refinance before it would have crossed the PMI cancellation point anyway — you capture the lower early payment and avoid the second-lien tail risk entirely.
- PMI tends to win when you plan to stay in the home for years past the point your balance is scheduled to hit 78%–80% of original value — the HPA's automatic and borrower-requested cancellation rights mean the cost has a hard, legally guaranteed stop date that a second lien's own term does not.
- A HELOC piggyback is the riskiest version of either path — a variable rate stacked on top of the duration risk a fixed-rate second lien already carries, plus the resubordination friction if you refinance the first mortgage while the HELOC is still open.
Frequently asked
What does 80-10-10 mean in a piggyback loan?+
It describes the three pieces of the purchase: an 80% first mortgage, a 10% second mortgage (a home equity loan or HELOC behind the first lien), and a 10% cash down payment — together covering 100% of the price without private mortgage insurance, because the first mortgage sits at exactly 80% loan-to-value.
Is a piggyback second mortgage more expensive than PMI?+
It depends on the size of the second loan and how long you hold it. The second lien carries a materially higher rate than a first mortgage and that interest applies for as long as the balance exists, while PMI is a percentage of the shrinking original loan amount that is legally required to cancel by the time the loan is scheduled to reach 78% of its original value. A large, long-held second lien tends to cost more; a small one paid off quickly can cost less. Run both scenarios rather than assuming either wins.
Does PMI go away automatically?+
Yes. Under the Homeowners Protection Act, a servicer must automatically terminate PMI once the loan is scheduled to reach 78% of the home's original value, provided the borrower is current on payments. Borrowers can also request cancellation once they reach 80% of original value. A piggyback second mortgage has no equivalent automatic end date — it amortizes on its own schedule or carries a balance until refinanced or paid off.
Keep reading
- FHA vs Conventional for First-Time BuyersThe mortgage-insurance difference that usually decides between FHA MIP and conventional PMI.
- HELOC vs Cash-Out RefinanceThe same second-lien-vs-replace-everything logic, applied to renovation financing after you already own the home.
- Down Payment Assistance: Grants & Programs ExplainedPrograms that can shrink or eliminate the piggyback-vs-PMI question entirely.
Methodology
All rate figures are drawn from Bankrate's and Freddie Mac's published August 2026 surveys, cited below with their survey dates. The worked example prices both first mortgages at the same baseline rate for comparability, which understates any loan-level pricing adjustment a 90% LTV first mortgage can carry versus an 80% LTV one — we did not find a reliable published figure for that adjustment specifically and are not estimating one. Bankrate's 8.10% home equity loan average reflects a 5-year fixed-rate loan; we apply it to a 20-year amortization for the second lien, which a lender pricing an actual 20-year term specifically could set higher or lower than the survey average — the sensitivity check in the worked-example section shows the comparison's conclusion holds across Bankrate's full published range regardless. PMI is applied as a straight percentage of the original loan amount per Bankrate's published range; your actual premium depends on credit score and is quoted by your lender. The 78%/80% thresholds above are the standard-loan rule under the Homeowners Protection Act; loans the CFPB's procedures classify as “high-risk” instead terminate at 77% of original value or at the loan's amortization midpoint, whichever is earlier — this guide's worked example assumes a standard loan. HELOC structure (variable rate, draw period, repayment-period step-up) is per the CFPB. The mortgage-interest-deduction treatment of a second lien — acquisition-debt status, the combined $750,000 cap, and the itemizing requirement — is per IRS Publication 936; the expired mortgage-insurance-premium deduction means PMI carries no current federal deduction. The refinance-subordination friction unique to a second lien is per Fannie Mae's Selling Guide (B2-1.2-04); state law can vary on whether a new resubordination agreement is required. This guide is educational and is not financial or tax advice.
Sources
- Bankrate — Current Home Equity Loan Rates (national average 8.10% APR, 5.90%–10.25% range, August 12, 2026) — accessed 2026-08-19
- Bankrate — Current HELOC Rates (national average 7.30%, 3.99%–11.80% range, August 12, 2026) — accessed 2026-08-19
- Bankrate — Piggyback Loans: What They Are and How They Work (PMI premium range 0.46%–1.5% of loan amount) — accessed 2026-08-19
- Freddie Mac — Primary Mortgage Market Survey (30-year fixed 6.67%, week of August 13, 2026) — accessed 2026-08-19
- Consumer Financial Protection Bureau — Homeowners Protection Act (HPA) or PMI Cancellation Act examination procedures, PDF — 78% automatic termination, 80% borrower-requested cancellation (12 U.S.C. §4902(a) and (b)) — accessed 2026-08-20
- Consumer Financial Protection Bureau — What is a home equity line of credit (HELOC)? — accessed 2026-08-25
- Fannie Mae Selling Guide — B2-1.2-04: Subordinate Financing (resubordination requirement on refinance) — accessed 2026-08-25
- IRS — Publication 936, Home Mortgage Interest Deduction — accessed 2026-08-25